Pfizer Inc. (PFE) announced that it has entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. (GS) whereby it will repurchase $5 billion of its common stock.
Pfizer will receive approximately 150 million shares on Feb 11, 2015, which will be repurchased under this transaction. The settlement is scheduled to occur during or prior to the third quarter of 2015.
During the settlement, Goldman may be required to deliver additional shares of common stock to Pfizer. However, under certain circumstances, Pfizer may be required to deliver shares of its common stock. The company might also opt to make a cash payment to Goldman. The number of shares to be delivered or the amount of such payment will be determined on the volume-weighted average price of Pfizer’s common stock during the term of the transaction.
We note that the repurchase agreement with Goldman Sachs is part of Pfizer’s existing share repurchase authorization. Under this agreement, its board of directors authorized the repurchase of shares worth $11 billion in Oct 2014.
We remind investors that Pfizer repurchased shares for $5.0 billion in 2014, thereby returning approximately $12 billion to shareholders through share repurchases and dividends in 2014.The recent share repurchase program reinforces the company’s commitment to return value to shareholders. Pfizer plans to repurchase shares for $6 billion in 2015.
Last month, Pfizer reported better-than-expected sales and earnings in the fourth quarter of 2014, keeping its earnings streak alive. However, the company’s guidance for 2015 was disappointing. Last week, Pfizer was in the news when it announced the acquisition of Hospira Inc. (HSP) for about $17 billion or $90 per share.
Pfizer currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the health care sector is Allergan (AGN), carrying a Zacks Rank #2 (Buy).
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